Let Velardo Appraisal Group help you decide if you can eliminate your PMI
A 20% down payment is usually accepted when purchasing a home. Considering the liability for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser defaults.
Banks were working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender absorbs all the losses, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner refrain from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen homeowners can get off the hook a little earlier. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things cooled off.
The toughest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Velardo Appraisal Group, we're experts at recognizing value trends in Medina, Medina County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: